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How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

Dentsu dominates Japan’s media sector and advertising

Dentsu switches from JGAAP to IFRS accounting standards with big impact on KPIs

Dentsu dominates Japan’s advertising and media industries, and attracts some of the most creative Japanese talent, although Dentsu is not the first advertising agency in Japan – that priority belongs to Hakuhodo.

From April 1, 2015, Dentsu decided to switch to IFRS accounting standards from Japan’s JGAAP standards. For FY2014, Dentsu reports financial results both using IFRS and JGAAP standards, giving us the fascinating opportunity to compare both accounting standards for a major corporation.

So how big is Dentsu? For FY 2014 (April 1, 2014 – March 31, 2015) Dentsu reports (we have rounded the figures):

  • Turnover (IFRS) = ¥ 4642 billion (=US$ 37 billion)
  • Net Sales (JGAAP) = ¥ 2419 billion (=US$ 19 billion)
  • Revenues (IFRS) = ¥ 729 billion (=US$ 6 billion)

For operating income, net income and other data IFRS and JGAAP measure quite different KPIs.

Disruption is on the way: CyberAgent based on blogs, Recruit based on classified advertising and HR, LINE based on sticker communications, and many more…

How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?
How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

Managing Japan/West cultural issues via the Dentsu-Aegis-Network

As for many Japanese corporations, Dentsu’s challenge is to leverage a dominating position in Japan into a global business footprint, while managing the well-known cultural issues. Dentsu’s approach was to acquire the French/UK agency Aegis, and then via Dentsu-Aegis acquire a string of agencies all over Europe:

Dentsu and Dentsu-Aegis

Dentsu dominates Japan’s advertising space, and is a very very strong force in Japan’s media industry sector, through control and management of major advertising channels with an overwhelming market share in Japan, and has been working hard to leverage its creative power and strength in Japan into a larger global footprint.

A big step forward towards a larger global footprint for Dentsu was the acquisition of the London based Aegis Group, announced on July 5, 2012.

Read our report on Japan’s Media Landscape

Dentsu HQ
Dentsu HQ

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Japan brand management: Saatchi & Saatchi Japan CEO Philip Rubel talks about Lovemarks in Japan

Japan brand management: brands often work differently in Japan. Saatchi & Saatchi Japan CEO Philip Rubel explains Lovemarks in Japan

Japan brand management: Saatchi & Saatchi Japan CEO Philip Rubel talks about Lovemarks in Japan
Japan brand management: Saatchi & Saatchi Japan CEO Philip Rubel talks about Lovemarks in Japan

by Gerhard Fasol

Philip Rubel, CEO of Saatchi & Saatchi Fallon Tokyo KK gave a talk about “Lovemarks”, a concept in branding developed by Saatchi & Saatchi CEO Kevin Roberts.

To understand Japan’s media landscape read the “Japan’s media” report.

The argument is that traditional “brands” are losing relevance because in our advanced “post-industrial” societies, function and technology are given, and can usually be rapidly reproduced or overtaken by competitors. Therefore, advertising based on function or technology does not work anymore. Another factor is the shift from traditional one-way media such as TV and print, to social media and peer-to-peer interactions, where anyone can publish anything about “brands” and “brands” cannot do anything about it directly. Thus traditional brands are dead. So, how can we get people to attach irrationally, beyond reason? Lasting relationships are not based on rational thinking.

Japan brand management: Lovemarks create loyalty which goes beyond reason

“Lovemarks” counter these effects: the concept of Lovemarks is to “create loyalty which goes beyond reason”. To create love for the Lovemarks. To get there, Saatchi & Saatchi believes in the “unreasonable” power of creativity: creativity can create loyalty beyond reason.

Philip Rubel showed us several examples of campaigns, mainly in Japan, which were successful far beyond expectations. These campaigns are based on creativity, incorporate surprise, appeal to emotion, and aim to exploit viral sharing on social media such as facebook and YouTube. Creativity is used to replace expensive traditional top-down one-way media such as TV and print, by social media, internet, YouTube and viral sharing and engagement. Here are some examples:

BMW films by Fallon

The issue was to develop the BMW brand in USA with limited budgets. BMW Films was a series of films created by famous directors and famous actors, which was uploaded to the website for download. BMW Films became famous, actors volunteered to appear, and download figures were far beyond plan.

SONY Bravia balls in San Francisco

Making of SONY Bravia balls

SONY Bravia paint

Godiva Love & Hug project for Valentine’s day 2013

For Valentine’s day 2013, Saatchi & Saatchi built a hugging robot, which people could hug, and the hugs were measured, rated, and photographed, and the results could be displayed on social network sites etc. The campaign is explained here on Saatchi & Saatchi’s website.

De’Longhi coffee campaign: Michelangelo’s David

De’Longhi had the issue of competing with much more powerful Nestle’s campaign centered on George Clooney. De’Longhi decided to use Michelangelo’s David, who is immensely popular in Japan – and who does not require actor’s fees…

Reebok Rajio Taiso

Radio Taiso is a morning gymnastics series, which Japan’s national radio and TV system NHK started back in 1928. Saatchi & Saatchi created an imitation of Radio Taiso using professional acrobats, and relied on viral marketing. The advertised brand name appears only very briefly at the end of the video clip – enough to create response far beyond expectations:

T-Mobile “Life’s for sharing” campaign

T-Mobile “Life’s for sharing” Royal Wedding episode currently has 27,539,402 views on YouTube:

Understand Japan’s media and advertising industries

Report on Japan’s Media (approx. 200 pages, pdf file)

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Masaru Ibuka, Founder of SONY, Obituary for NATURE

Masaru Ibuka obituary in NATURE by Gerhard Fasol

After Masaru Ibuka (井深大) died on December 19, 1997, NATURE asked me to write an obituary about Masaru Ibuka, which was published in Nature on February 26, 1998, and you can download the article as a pdf-file here. The reference is: Gerhard Fasol, “Obituary: Masaru Ibuka (1908-97)”, Nature 391, p. 848 (26 February 1998).

Masaru Ibuka obituary in NATURE by Gerhard Fasol – the background

I used several weeks of my spare time to research and write this obituary. For example, I worked to reach and talk with several people who had met Ibuka in person, since I had never personally met Ibuka. As another example: General McArthur’s Government of Japan wanted to communicate with the population of Japan via radio, however, radio receiver production in Japan was very inefficient at that time due to quality problems, leading to very low yield. So General McArthur’s Government brought Quality experts Homer Sarasohn and Charles Protzmann to Japan to teach classes in quality management. I found out that Ibuka was a keen student of these quality classes. To understand this better, I phoned with a retired officer of General McArthur’s Government, and I also found relatives of Homer Sarasohn, who very kindly gave me a lot of information about Homer Sarasohn’s work in teaching quality management in Japan.

Debunking some myths about SONY and Masaru Ibuka

Interestingly, there is a lot of misunderstandings and myths around SONY, some of which I clarified in the Nature obituary for Masaru Ibuka.

Myth: Akio Morita is the founder of SONY

Reality: SONY was founded as Tokyo Tsushin Kenkyusho (the Tokyo Communications Laboratory) by Masaru Ibuka and by Akio Morita, who are the two co-founders of Tokyo Tsushin Kenkyusho, the company name was later changed to SONY.

Myth in Japan: Many people in Japan think that SONY is an American company

Reality: SONY is a Japanese company with headquarters in Tokyo-Shinagawa. The reason why many people think that SONY is an American company, is that SONY’s company name and brand name in Japan is written in Katakana, while traditional Japanese companies always write their company in Chinese characters (Kanji). (Note however, that Nissan President Carlos Ghosn, says that companies have no nationality).

Myth: Nobel Prize winner Leo Esaki discovered the tunnel diode, for which he was awarded the Nobel Prize, at IBM

Reality: Leo Esaki discovered the tunnel diode as a researcher at Tokyo Tsushin Kenkyusho, which later changed the company name to SONY. Leo Esaki then moved to IBM Yorktown Heights R&D labs, and was awarded the Nobel Prize while working at IBM for his discovery of the tunnel diode, which he discovered while working at Tokyo Tsushin Kenkyusho.

Read more about today’s SONY:

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